Year End Economic Forecast

Since my last posting we have been in contact with over 200 senior financial executives to get their thoughts on the economic climate for 2010.  This wasn’t a scientific survey, as we contacted people we knew and have done business with over the past two to three years.  So, it’s not a random sample of Bay Area CFO’s, but we trust the people we spoke to and feel the information is pretty reliable.  Here are the questions we asked and the responses we received.

1. How do you feel about the economic climate compared to this time last year?  The overwhelming response was better than last year.  Only a few people feel things are the same or worse than last year.
2. During 2009 did your company do any of the following:
   1. Have a RIF or hiring freeze?  Less than 15% did either of these.
   2. Cut employee pay or reduce work hours?  Less than 15% Yes.
   3. Freeze pay, promotions, or reduce or eliminate bonuses?  About 25% did one or more of these things to get through the downturn.
   4. Cut back on the use of or eliminate temp or contract workers?  About 25% did.  But most of these firms are starting to use temp services again.
   5. Experience a tightening of credit from your firm’s financial institutions?  A very surprising less than 5% felt this.

1. How are you feeling about economic prospects for the Valley for 2010?  Over 90% of respondents feel the Valley will be stronger in 2010.
2. Most respondents feel their own firm’s prospects for 2010 will be stronger than 2009.  But none of them see 2010 as a boom year, but a definite improvement over the past year.
3. Close to 40% of respondents plan to increase staff in 2010.  Less than 10% feel they will reduce staff.  The remaining half believes they are adequately staffed for 2010.
4. When asked if they think the Great Recession is over, over 75% responded that it is over.  But, several qualified their response.  There is still some anxiety about the overall economy, but most feel the worst is past.
5. Our last question was:  What’s your biggest remaining economic concern?  Over half of the respondents are concerned about the future of California. The recent budget mess, and sales tax increases were a frequent concern.  Next on the list was the high level of unemployment in the Valley and the USA.  No one mentioned healthcare or China, which surprised me.

The overall mood is much more upbeat than this same time last year.  We are also feeling good about 2010.  We are seeing an increase in search assignments and an up-tick in contract activity as well.  Please accept our best wishes for 2010!